Classes of Shares

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Definition: Classes of Shares

A stock signifies ownership in the company. Stocks have voting rights associated with them. However not all stocks have equal voting rights and this forms the classification of the stocks into different classes.

Generally any company issues new stock at different stages to different types of investors like promoters, angel investors, venture capitalists, mutual funds, general public etc. In order to ensure that the power to take important decisions lies with the promoters of the company, the company’s stocks are divided into classes such that the class of shares with the highest voting power remains with the promoters.

The different categories of shares are:

Class A: These shares generally have more voting rights than Class B or C. They are generally reserved by the promoters. For e.g. Every class A share might have 10 voting rights

Class B: These shares do not generally have as high voting rights as Class A. For e.g. class B shares might have one vote per share

Further classification of the stocks into Class C is also possible depending upon the voting rights.